Assuming that your objective is to design the perfect bond for each of these firms, choose the bond that you would use to fund each of the following companies. Pick one of each of the following choices. Write the right answer for each firm and very briefly explain your choices.

Maturity: Short term or Long term

Currency: Dollar or Mixed Currency

Fixed or Floating: Fixed rate or Floating rate

Straight or Convertible: Straight or Convertible

(Sample answer: Long term because ., Mixed currency because , Fixed rate because , Convertible because)

(1 point) A steel company with heavy infrastructure investments, no pricing power and stable earnings, with all of its operating earnings in the United States (1 point) A mature consumer product company whose primary asset is its brand name, with substantial pricing power and revenues spread over all parts of the globe

Specify whether the following statements about discounted cash flow valuation are true or false (unless otherwise specified by the question, assume that all variables are constant except for the variable discussed):

1. (0.5 points) For two conventional projects whose cumulative cash flows are identical, the higher the discount rate, the more valuable will be the proposal with the early cash flows.

2. (0.5 points) Use of the IRR method implicitly assumes that the project's intermediate cash inflows are reinvested at the required rate of return used under the NPV method.

3. (0.5 points) The free cash flow to equity is the available cash flow after capital expenditures.

4. (0.5 points) The free cash flow to equity will always be higher than the dividend.

5. (0.5 points) The free cash flow to the firm will always be lower than the cash flow to equity, because FCFE is a pre-debt cash flow.

6. (0.5 points) If a company can raise prices as inflation increases, its valuation should also increase because of higher expected cash flows